Samsung Warns of a Challenging 2016 Amid Competition

Samsung in 2016: Where Is the Company Headed?
  • Co-CEO urges employees to think differently about the industry
  • Samsung needs to adapt to industry shifts on software

Samsung Electronics Co. expects global economic growth to remain weak this year and urged employees to brainstorm ways to handle intensifying competition in an industry where software and platforms are eclipsing hardware.

Kwon Oh Hyun, vice chairman and co-chief executive officer, said products including smartphones, televisions and memory chips will face escalated competition this year. Innovative business models are weakening traditional hardware values and workers must adapt to maintain leadership in an industry changing at its fastest pace ever, he said.

Kwon Oh Hyun.
Kwon Oh Hyun.
Photographer: SeongJoon Cho/Bloomberg

“The territories of industries are collapsing,” Kwon said. “We have to compete in a new way that we’ve never experienced in the past.”

Executives have preached the need to focus on software for years. Yet Korea’s largest listed company and the world’s biggest smartphone maker has lagged Apple Inc. in developing mobile-friendly software and a unique platform that can lock in users. 

“The competition landscape is changing to software and platforms, so we need to build a new system and competence,” Kwon said in a speech distributed to the media.

Lagging Apple

In a signal of its newfound priorities, Samsung replaced the head of its phone operations in December with an executive -- Koh Dong Jin -- who helped create its mobile payment and security platforms.

Koh will work to turn around a division that still leads the world in smartphone sales yet has lost favor with investors.

Samsung lost more than $8 billion in market value in 2015 as sales of high-end S6 and Note 5 devices sputtered against new models from Apple and Chinese makers. Its shares posted a third straight annual decline last year, dropping 5.1 percent.

The company is expected to release its preliminary fourth-quarter earnings on Friday. Net income in 2015 is projected to be the lowest profit in four years, according to analyst estimates. 

(Corrects financial year in last paragraph of story published Jan. 4.)
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